Radiance Capital Receivables Twenty One

Opinions

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-789

No. COA22-146

Filed 6 December 2022

Dare County, No. 11 CVS 1014

RADIANCE CAPITAL RECEIVABLES TWENTY ONE, LLC, Assignee of FIRST BANK, Plaintiff,

v.

TIMOTHY E. LANCSEK, Defendant.

Appeal by defendant from judgment entered 9 September 2021 by Judge Jerry

R. Tillett in Dare County Superior Court. Heard in the Court of Appeals 9 August

2022.

Gregory P. Chocklett for plaintiff-appellee.

Sharp, Graham, Baker & Varnell, LLP, by Casey C. Varnell, for defendantappellant .

GORE, Judge.

I.

¶1 A Default Judgment (“Judgment”) was entered against defendant Timothy E.

Lancsek in favor of First Bank on 18 January 2012 in the Dare County Superior Court

for money owed on a Note secured by a deed of trust on land located in Dare County,

North Carolina. The Judgment was sold and assigned to plaintiff Radiance Capital

Receivables Twenty One, LLC on 13 June 2017 and filed with the court 18 March

Opinion of the Court

2020. The parties dispute when collection efforts began; defendant claims efforts

began November 2020, while plaintiff claims efforts began with a solicitation to settle

and resolve the Judgment in the summer of 2020. Settlement discussions failed and

on 28 September 2020, plaintiff obtained a Notice of Right to Claim Exempt Property

(“Notice of Right”) from the Dare County Clerk of Court’s office to serve upon

defendant.

¶2 Plaintiff attempted to serve defendant with his Notice of Right by certified

mail, but it was returned unsigned after three attempts. Plaintiff then attempted

service by USPS First Class Mail on 5 November 2020 to defendant’s last known

address, which was returned unclaimed. Plaintiff filed an Affidavit of Service of

Notice of Right and sought a writ of execution. The writ of execution was issued by

the Dare County Clerk on 31 December 2020. When plaintiff requested the clerk to

issue the writ, plaintiff’s counsel requested the clerk send the writ to his office,

because plaintiff’s counsel intended to obtain an Order in Aid of Execution and send

both the writ and the Order to the Sheriff’s Office. Parties disagree as to when the

Sheriff first attempted service upon defendant with the writ.

¶3 On 12 January 2021, plaintiff filed an Ex Parte Motion for an Order in Aid of

Execution (“Ex Parte Order”) for the “Dare County Sheriff’s office to levy on

defendant’s bank or credit union accounts, deposits, certificates of deposits, or other

assets located in Dare County.” On 25 January 2021, the trial court granted the Ex

Parte Order “conclud[ing] as a matter of law that the property of defendant [was]

subject to levy upon a Writ of Execution pursuant to, inter alia, [N.C. Gen. Stat.] §§

1-359, 1-360, and 1-362.” The Ex Parte Order forbade Dare County financial

institutions from transferring or disposing of defendant’s property and required them

to freeze the accounts up to the amount outstanding on the Judgment. On 1 February

2021, the Dare County Sheriff personally served defendant with the Writ of Execution

and the Ex Parte Order. The date of return of the Writ of Execution is listed as 14

September 2021. On 4 February 2021, the Sheriff seized defendant’s Wells Fargo

joint bank account and Wells Fargo then transferred $153,805.24 from the account to

the Sheriff’s Office to satisfy the total amount of the Writ of Execution.

¶4 Counsel for both parties then conferred as to the ownership of the joint bank

account and what amount from the account was subject to the Sheriff’s levy, but

discussions failed. On 12 March 2021, plaintiff filed a Motion for Order Granting

Plaintiff’s First Request for Production of Documents in Supplemental Proceedings

to Defendant Timothy E. Lancsek requesting the trial court order defendant to

produce certain bank documents to determine proper ownership of the joint bank

account. Plaintiff also filed a Motion for an Additional Order in Aid of Execution in

which plaintiff sought a hearing regarding the portion of the funds owned by

defendant and subject to the levy.

¶5 On or about 26 March 2021, the trial court entered an Additional Order in Aid

of Execution and Order for Production of Documents in Supplemental Proceedings

after hearing arguments from counsel. This Order granted plaintiff’s motion for first

request for production of documents in supplemental proceedings and required the

Dare County Sheriff to retain the levied funds until resolution. The trial court also

required an evidentiary hearing after exchange of the documents to determine the

remaining issues regarding the levied funds. Defendant produced the requested

documents and on 14 June 2021, plaintiff filed an affidavit summarizing the

discovered bank statements along with the percentages of contributions between

defendant and his wife to the joint bank account.

¶6 On 21 June 2021, a Second Additional Aid in Order of Execution hearing

occurred to determine who owned the joint bank account, whether the funds were

properly levied, and any exemptions available to defendant. At the beginning of the

hearing, defendant’s counsel briefly made claims of procedural error in the issuance

of the Notice of Right, stating defendant never received service of the Notice of Right

and thus the writ of execution and Ex Parte Order were issued prematurely.

¶7 Judge Tillet asked defendant’s counsel what was done in response to the

personally served writ of execution given this claim of procedural error, to which

defense counsel responded they did not act because of belief the joint account was

inaccessible to execution. On 2 July 2021, Judge Tillet sent a letter with his findings

to parties’ counsel, and on 9 September 2021, issued his Second Additional Order in

Aid of Execution. The trial court found defendant’s joint account held approximately

82% of defendant’s deposits and approximately 18% of his wife’s deposits, and further

found the Sheriff levied 66% of the funds from the joint account, which resulted in

$38,461.54 of defendant’s deposits remaining in the account after levy. The trial court

also found defendant failed to meet his burden of proof of any equitable reasons to

exempt any of the funds seized or that any funds were necessary for family purposes

under Section 1-362. Finally, the trial court concluded that defendant was “guilty of

laches in being dilatory in exercising or protecting his rights or property.” Defendant

timely appealed the entry of the Second Additional Order in Aid of Execution.

II.

¶8 Defendant raises the following issues on appeal: (1) whether the issuance of

the writ of execution was valid for lack of proper service of the Notice of Right; (2)

whether the trial court erred in granting the Ex Parte Order allowing seizure of

defendant’s joint bank account at Wells Fargo; (3) whether defendant met his burden

of proof for exemption of the last sixty days of his income per Section 1-362; and (4)

whether the trial court erred in concluding that defendant was guilty of laches for

being dilatory in his efforts to protect his rights. After careful review of the record

and applicable law, we affirm.

A.

¶9 Defendant challenges the trial court’s jurisdiction to issue the Ex Parte Order,

claiming the court acted beyond its authority under Section 1-360 in his Appellant

Brief and Section 1-358 in his Reply-Brief. N.C. Gen. Stat. §§ 1-358, 1-360 (2021).

Defendant claims the trial court lacked subject matter jurisdiction to grant this

supplemental proceeding prior to any unsuccessful attempt by plaintiff to satisfy the

writ of execution in whole or in part. We disagree.

¶ 10 A challenge to subject matter jurisdiction does not require preservation to

appeal. “Subject matter jurisdiction, a threshold requirement for a court to hear and

adjudicate a controversy brought before it, is conferred upon the courts by either the

North Carolina Constitution or by statute.” In re M.B., 179 N.C. App. 572, 574, 635

S.E.2d 8, 10 (2006) (internal quotations and citations omitted). “[T]he issue of subject

matter jurisdiction may be raised for the first time on appeal.” Burgess v. Burgess,

205 N.C. App. 325, 328, 698 S.E.2d 666, 669 (2010) (citations omitted). A challenge

to subject matter jurisdiction is reviewed de novo. Milone & MacBroom, Inc. v.

Corkum, 279 N.C. App. 576, 580, 2021-NCCOA-526, ¶ 11.

¶ 11 In Milone & MacBroom, Inc., this Court considered a trial court’s jurisdiction

to institute a supplemental proceeding under Section 1-352 prior to the issuance of a

writ of execution. Id. at 578, 2021-NCCOA-526, ¶¶ 7, 15. This Court held the trial

court lacked statutory authority under Section 1-352 over the supplemental

proceedings conducted prior to the issuance of the writ of execution. Id. at 582, 2021-

NCCOA-526, ¶¶ 15, 16. This Court reasoned the record did not establish the issuance

of a writ of execution. Id. This Court concluded the plain language of Section 1-352

required both the issuance of the writ of execution prior to a supplemental proceeding,

and that the writ of execution be returned unsatisfied in part or in whole. Id., 2021-

NCCOA-526, ¶ 15.

¶ 12 Unlike Section 1-352, Section 1-358 and Section 1-360 do not require a return

of the execution unsatisfied prior to any supplemental proceeding. Section 1-358

states, “The court or judge may, by order, forbid a transfer or other disposition of, or

any interference with, the property of the judgment debtor not exempt from

execution.” N.C. Gen. Stat. § 1-358 (2021). Generally, supplemental proceedings in

Article 31 of Chapter 1 of the General Statutes are only available after the creditor

attempts to satisfy an issued execution and it is returned unsatisfied. Massey v.

Cates, 2 N.C. App. 162, 164, 162 S.E.2d 589, 591 (1968). The requirement that the

execution be returned unsatisfied is explicitly included within certain statutes and

excluded from other statutes. See N.C. Gen. Stat. §§ 1-352 and 1-360. Thus, as stated

in Milone & MacBroom, Inc., “It is apparent from both the plain language of the

supplemental proceeding statutes and our prior case law that a statutory

precondition to instituting supplemental proceedings against a defendant is the

issuance of a writ of execution and, under Section 1-352, the return of that writ

unsatisfied in whole or in part.” 279 N.C. App. at 582, 2021-NCCOA-526, ¶ 15.

¶ 13 The proceeding in this case differs from Milone & MacBroom, Inc., because the

supplemental proceeding in that case, per Sections 1-352, 1-352.1, and 1-352.2, was

a procedural mechanism directed at the judgment debtor to discover his existing

property. Whereas in this case the supplemental proceeding, per Sections 1-358 and

1-360, is a procedural mechanism to pursue the judgment debtor’s property that is in

the hands of third parties not party to the suit. As stated in Motor Finance Co. v.

Putnam,

When [Sections 1-358 and 1-360] are read either singly or as a component part of Article 31 of the General Statutes, it is plain that a supplemental proceeding against a third person is designed to reach and apply to the satisfaction of the judgment property of the judgment debtor in the hands of the third person . . . at the time of the issuance and service of the order[.]

229 N.C. 555, 557, 50 S.E.2d 670, 671 (1948); see also Cornelius v. Albertson, 244 N.C.

265, 267–68, 93 S.E.2d 147, 149 (1956) (explaining the procedure of Section 1-360

when a person, not party to the suit, has property of the judgment debtor).

¶ 14 In Milone & MacBroom, Inc., the plaintiff served interrogatories and requests

for production of documents, which are supplemental proceedings available within

Sections 1-352.1 and 1-352.2. 279 N.C. App. at 577, 2021-NCCOA-526, ¶ 4. These

were proceedings directed at the judgment debtor to discover the debtor’s property.

However, in the present case, the Ex Parte Order was entered to prevent transfer of

defendant’s property and/or funds by a Dare County financial institution, a third

party with access to the property. Such a proceeding is directed at third parties to

assist in the levying of defendant’s personal property as authorized by the writ of

execution. Since the Ex Parte Order was issued pursuant to Sections 1-358 and 1-

360 to prevent third parties from disposing of property, the Ex Parte Order differed

from the supplemental proceeding in Milone & MacBroom, Inc., in which the trial

court lacked subject matter jurisdiction.

¶ 15 In the present case, the clerk issued a writ of execution on 31 December 2021.

Plaintiff then filed a Motion for an Ex Parte Order on 12 January 2021. Plaintiff

sought the Ex Parte Order as supplemental to the issued writ of execution. The trial

court granted the Ex Parte Order on 25 January 2021. While the parties dispute the

issuance of the writ of execution and any attempts, this Court is limited to the record

before it and without further evidence may only rely on the dates of issuance, and the

Orders confirming the same. Since the writ of execution was issued prior to the

supplemental proceeding of an Ex Parte Order per Sections 1-358 and 1-360, we

conclude the trial court had proper subject matter jurisdiction to grant the Order and

such order was valid. See Songwooyarn Trading Co. v. Sox Eleven, Inc., 219 N.C.

App. 213, 218, 723 S.E.2d 569, 572–73 (2012) (holding it was within the trial court’s

jurisdiction and authority to prohibit the defendant’s “transfer, disposal, or removal

of property or assets” under Section 1-358).

B.

¶ 16 Defendant challenges the validity of the issued writ of execution, claiming

plaintiff failed to follow statutory procedure in serving the Notice of Right prior to

seeking the writ of execution. Because defendant failed to properly preserve his right

to appeal these alleged procedural errors, this Court may not review the same under

North Carolina Rules of Appellate Procedure 10(a).

¶ 17 Under Rule 10(a) of the North Carolina Rules of Appellate Procedure,

to preserve an issue for appellate review, a party must have presented to the trial court a timely request, objection, or motion, stating the specific grounds for the ruling the party desired the court to make if the specific grounds were not apparent from the context. It is also necessary for the complaining party to obtain a ruling upon the party’s request, objection, or motion. Any such issue that was properly preserved for review by action of counsel taken during the course of proceedings in the trial tribunal by objection noted . . . may be made the basis of an issue presented on appeal.

Our Supreme Court has stated there are two requirements for preserving an issue:

“(1) a timely objection clearly (by specific language or by context) raising the issue;

and (2) a ruling on that issue by the trial court.” M.E. v. T.J., 380 N.C. 539, 559,

2022-NCSC-23, ¶ 50. While a recitation of “certain magical words” is not required to

preserve the issue for appeal, there is a “functional requirement of bringing the trial

court’s attention to the issue such that the court may rule on it.” Id. at 559, 2022-

NCSC-23, ¶ 51. In M.E., the Court determined the plaintiff properly preserved her

right to appeal because she raised the issue and obtained a ruling on her claim

regarding the constitutionality of relief in a Chapter 50B case. Id. at 560, 2022-

NCSC-23, ¶ 53.

¶ 18 In the present case, defense counsel failed to challenge the Notice of Right

service and validity of the writ of execution and Ex Parte Order until an equitable

hearing of the Second Additional Order in Aid of Execution, conducted for the purpose

of determining equitable exemptions under Section 1-362. Even if this attempt could

constitute raising and preserving the issue for appeal, absent a record of the trial

court’s ruling on the issue, defendant fails to meet both requirements for preservation

of the right to appeal under Rule 10(a). Defendant claims service of the Notice of

Right was inadequate in 2020, and that the writ was not delivered along with the Ex

Parte Order until 4 February 2021, yet defendant made no efforts to contest errors to

these procedural mechanisms from February 2021 until June 2021. The record is

silent as to any challenges to these alleged violations, any motions, or other attempt

to set aside the writ or Ex Parte Order. This Court will not review an unpreserved

issue on appeal. N.C.R. App. P. 10(a).

C.

¶ 19 Defendant next challenges the trial court’s finding he failed to meet his burden

of proof to claim exemption of his earnings for family purposes the sixty days prior to

levy. We disagree.

¶ 20 The purpose of supplemental proceedings “is to afford the creditor an equitable

remedy for the enforcement of his judgment[.]” Hasty v. Simpson, 77 N.C. 69, 70

(1877); Johnson Cotton Co. v. Reaves, 225 N.C. 436, 443, 35 S.E.2d 408, 413 (1945)

(“This being a supplemental proceeding under Article 31 of Chapter 1 of General

Statutes, equitable in its nature . . .”). The standard of review for a non-jury trial is

“whether there is competent evidence to support the court’s findings of fact and

whether the findings support the conclusions of law and ensuing judgment.” Cartin

v. Harrison, 151 N.C. App. 697, 699, 567 S.E.2d 174, 176 (2002) (citation omitted).

“[T]his Court’s review . . . is limited to a determination of whether an abuse of

discretion occurred. An abuse of discretion is a decision manifestly unsupported by

reason or one so arbitrary that it could not have been the result of a reasoned

decision.” Briley v. Farabow, 348 N.C. 537, 547, 501 S.E.2d 649, 656 (1998).

¶ 21 Section 1-362 explicitly requires exemption from execution or garnishment of

the debtor’s earnings if the debtor shows by affidavit these “earnings are necessary

for the use of a family supported wholly or partly by his labor.” Elmwood v. Elmwood,

295 N.C. 168, 185, 244 S.E.2d 668, 678 (1978) (quoting N.C. Gen. Stat. § 1-362). In

Elmwood, the Supreme Court referred to a prior Supreme Court case, Goodwin v.

Clayton, 137 N.C. 224, 49 S.E. 173 (1904), for the proposition that the interpretation

of this statute should be “given a liberal construction favorable to the exemption.”

Elmwood, 295 N.C. at 185, 244 S.E.2d at 678. The debtor must demonstrate his

earnings are necessary to support his family for purposes of claiming exemption

under Section 1-362. Sturgill v. Sturgill, 49 N.C. App. 580, 586, 272 S.E.2d 423, 428

(1980).

¶ 22 The trial court included findings of fact in the Second Additional Order in Aid

of Execution to support its conclusions of law. The trial court determined defendant

failed to meet his burden of proof showing equitable reasons for exemption of any

seized funds sixty days prior to levy, and that he failed to prove the seized funds were

needed for family purposes under Section 1-362. Prior to entering this order, the trial

judge sent a letter to both parties explaining in further detail his findings. Within

the letter, the trial judge explained defendant’s funds were commingled and used

without “sufficient segregation” for business expenses, such as for taking clients to

dinner and paying taxes.

¶ 23 Further, defendant’s spreadsheet in support of his affidavit included both

business expenses and family expenses and did not distinguish between these

expenses. Defendant testified all expenses were family expenses since he is self-

employed. Defendant testified he expended $15,000 per month in expenses, yet his

wife claimed the family expenses were $6,000 per month. Even after levying the total

amount for satisfaction of the Judgment, defendant still had in his possession a total

of $38,461.54 of funds not including the funds contributed by his wife. Accordingly,

viewing these facts as a whole, competent evidence supported the trial court’s finding

that defendant failed to meet his burden of proof for exemption under Section 1-362.

Defendant has failed to show any abuse of discretion in this determination.

D.

¶ 24 Finally, defendant argues the trial court erred in concluding that defendant

was guilty of laches for being dilatory through his failure to protect his rights. We

disagree.

¶ 25 Under the doctrine of laches, a showing is required that (1) the party against

whom the doctrine is charged “negligently failed to assert an enforceable right within

a reasonable period of time, . . . and (2) that the propounder of the doctrine was

prejudiced by the delay in bringing the action.” Costin v. Shell, 53 N.C. App. 117,

120, 280 S.E.2d 42, 44 (1981). “What will constitute laches depends on the facts and

circumstances of each case.” Capps v. City of Raleigh, 35 N.C App. 290, 298, 241

S.E.2d 527, 532 (1978). In Capps, this Court held, based upon the facts, that the

delay of five years and nine months was unreasonable and without a rational excuse.

Id. While the “mere passage or lapse of time is insufficient to support a finding of

laches,” if the finding is based on the delay being unreasonable and working to the

“disadvantage, injury or prejudice of the person seeking to invoke it,” then this will

support an ultimate finding of laches. Id. (citation omitted).

¶ 26 In challenging the trial court’s finding, defendant merely points to his

statutory rights under Section 1C-1603, and when waiver applies within the

statutory scheme for the notice of rights. See N.C. Gen. Stat. § 1C-1603 (2021).

Defendant also incorrectly states the first attempts of post-judgment enforcement

were on 4 February 2021, yet at the hearing, defendant testified he had

communications with plaintiff over settlement efforts in the summer of 2020.

Defendant’s recitation of the facts conflicts with the record, and defendant fails to

ground his defense against a finding of laches in law. Defendant also testified he took

no action once in receipt of the writ of execution, because he was unfamiliar with the

processes conducted by plaintiff. Having reviewed the record, we conclude that

competent evidence supported the trial court’s determination that defendant was

guilty of laches for failure to exercise his rights.

III.

¶ 27 The trial court possessed subject matter jurisdiction to enforce plaintiff’s

Judgment against defendant, and defendant’s issues of procedural error were

unpreserved on appeal. The trial court did not err in finding defendant failed to meet

his burden under Section 1-362 to exempt a portion of the seized funds, nor did it err

in concluding that defendant was guilty of laches in being dilatory in exercising his

rights in a reasonable time frame.

AFFIRMED.

Judges TYSON and INMAN concur.